India Issues Tax Notices to Crypto Traders Over Unreported Activity From Earlier Years
Key Takeaways:Your response determines what happens next.”
The firm also highlighted structural issues when traders use multiple exchanges and wallets across different platforms. For example, the firm outlined a common transaction path where assets move across Coinswitch, Binance, private wallets, and Wazirx. In such scenarios, the tax system may capture only one segment of the transaction chain rather than the complete flow. This limited visibility can lead to mismatched records and inflated income assumptions. As a result, fragmented tracking may misrepresent actual trading activity and overstate income levels. Authorities often interpret gross turnover as income rather than net profit.
In one example, a trader may have executed transactions totaling ₹1.6 crore (approximately $172K) in volume during the year. The actual profit from those trades could be only ₹4–5 lakh (approximately $4,300–$5,400) after accounting for costs and losses. However, the system may initially flag the entire ₹1.6 crore (approximately $190,000) as deemed income until the taxpayer provides clarification.
Koinx urged that recipients should remain calm and act promptly to address the notice with accurate data. The tax firm stated: “If you receive this notice, do NOT panic.” The platform advised reconstructing complete transaction histories, calculating actual gains or losses, preparing accurate tax computations, and submitting supporting evidence. Noting that proper documentation and timely responses remain critical as enforcement systems continue expanding, the company concluded:
“Most notices can be resolved if your data is correct.”
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